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MiFID – Markets in Financial Instruments Directive

The Markets in Financial Instruments Directive (MiFID) came into effect everywhere in the EU at the beginning of November 2007. The purpose of the Directive is to strengthen investor protection and improve the functioning of the markets. In practice, this means that companies providing investment services, including banks, ask their customers for more specific information about customers’ financial standing, investment objectives and investment experience.

An update of the MiFID Directive came into effect on 3 January 2018. The purpose of the update is to, among other things, increase the transparency of the market and simplify comparing investment services.

MiFID was introduced in an effort to integrate the European securities market by making it easier to provide investment services within the EU and by removing barriers to trading.

What does MiFID apply to?

The MiFID provisions are applied when a customer uses investment services such as securities brokerage, asset management or investment advice. The provisions apply to all investment services and financial instruments such as equities, bonds and notes, and mutual funds. In contrast, MiFID does not apply to investments other than those made in financial instruments, such as endowment and life policies, bank deposits or real estate investments.

Personal investment advice may be provided by banks with the appropriate licence, investment service companies, a fund management company with an asset management licence or a representative operating on their account. The Financial Supervisory Authority grants the licences referred to above to Finnish companies and also monitors their operations.

Most investment customers are non-professional

Under MiFID, customers that use investment services belong to a category of investment customers. This is why customers are considered either non-professional or professional. Some of the professional customers can be so-called acceptable counterparties, including insurance and fund management companies. The categorisation is based on the detailed provisions of the Investment Services Act.

The customer categorisation influences the scope of investor protection, for example. Non-professional investors are covered by the most comprehensive investor protection. In contrast, professional investors are not covered by all the procedural rules of investor protection. MiFID assumes that the majority of investors are non-professional.

Procedures concerning investor protection

Customers receive information on their service provider and the services they are interested in. Such information includes the risks associated with different financial instruments, the costs charged on orders, the principles of executing orders and any conflicts of interest between the customer and the service provider.

For brokerage of orders that a service provider executes on its own initiative, the provider will ask customers who are considered non-professional for information on their investment experience and knowledge concerning the financial instrument to assess whether the customer has sufficient knowledge of the risks of the investment. On the basis of the information received from the customer, the service provider will assess whether the financial instrument or service is appropriate for the customer.

In order to recommend financial instruments or services that are appropriate for the customer, the service provider will request information on the customers’ investment experience and knowledge, financial position and investment goals. It is important that the customer provides this information so that the investment service company can assess what services and products are appropriate for the customer. If the customer does not provide sufficient information, services cannot be recommended to him or her.

The same assessment criteria are applied in all EU countries.

However, despite the assessment of appropriateness and suitability, the customer always carries the final risk of the results of investment activities.

Danske Bank is improving its investment services in 2018. When the MiFID II EU directive has come into effect, you will get more comprehensive information on your investments.

Additional information

Investor notification

Providers of investment and ancillary services must provide their customers with information on themselves and the services that they offer before making an agreement concerning a financial instrument or investment or ancillary service. The attached investor notification contains general information on Danske Bank A/S, Finland Branch, and its services.

Categorisation of investor customers

According to the Investment Services Act, a provider of investment services must notify customers of their categorisation as a non-professional customer, professional customer or eligible counterparty. The categorisation is based directly on the legislation and the Investment Services Act includes detailed provisions on the factors affecting the categorisation.

The customer categorisation has an effect on the extent of investor protection and the applicable procedural rules.

Order execution policy

List of venues and brokersOur most recent list of the most important execution venues and brokers can be found at www.danskebank.com/bestexecution. The website also shows which venues we use for each class of financial instruments when we execute the orders of non-professional and professional customers.

Principles on handling conflicts of interest

Danske Bank has adopted these principles as methods to be applied in identifying, preventing and managing conflicts of interest. The operational principles describe the methods the Bank follows and maintains to prevent conflicts of interest from damaging the interests of its customers.